Interest rates held at 5.75 percent, but house prices slow down

Filed Under Finance

Interest rates were held at 5.75 percent today by the Bank of England, which is welcome news for mortgage owners. As this was the first opportunity for the Bank of England (BoE) to change the base rates since the Northern Rock problems, it seems that the Bank wants to assess the impact of the recent credit problems before making any adjustments.

With the changes to the economy taking time to work through, the BoE is being sensible to act cautiously. As interest rates fell by 0.5 percent in the USA earlier this month, there may even be a case for base rates to fall in the UK slightly, although it is probably more likely that they just won’t be increased.

If we are at the top of this interest rate cycle, then mortgage owners could breathe a sigh of relief as long as lenders don’t tighten credit even further.

Less welcome news to the home owner is that house prices are not growing as fast as they were. The Halifax announced today that annual house price inflation decreased by 0.6% in September. The Halifax is also predicting a further slow down in house prices throughout the autumn.

This is not saying that house prices are falling, but that house prices are not increasing as fast as they were.

So is that two pieces of good news?

I guess it depends on your circumstances, but a period of calm both with interest rates and house prices will probably do us all good.